What’s next for Bed Bath & Beyond shares after a big Q2 loss?

Bed Bath & Beyond Inc (NASDAQ: BBBY), on Thursday, reported a much wider-than-expected loss for its fiscal Q2. Shares are down about 5.0% this morning.

How to play the Bed Bath & Beyond shares?

On the flip side, the chain of domestic merchandise retail stores “accelerated markdowns” were easing inventory overhang. Still, industry expert Jan Rogers Kniffen said in an interview with TD Ameritrade Network:

They haven’t had decent sales since 2016. They decided to revamp the business in 2019 and move into private label and be less dependent on branded goods. Now, we’re going back the other way. It’s a back to the future story and it’s not even a good future.

Competition from the likes of Amazon, Walmart, and Target remains a significant challenge as well, he added.

Wall Street sees downside in shares of Bed Bath & Beyond to $3.91 a share, which means the stock could tank another 35% from here.

Key takeaways from Bed Bath & Beyond Q2 report

• Net loss increased sharply from $73 million to $366 million
• Per-share loss of $4.59 was much worse than last year’s 72 cents
• Gross margin contracted 260 basis points in total to 27.7%
• Loss adjusted for one-time items printed at $3.22 per share
• Total sales tanked 27.6% year-on-year to $1.44 billion
• Consensus was $1.79 per-share loss (adj) on $1.45 billion sales

Merchandise inventories came down from $1.73 billion in February to $1.58 billion at the end of Q2. Free cash flow of negative $32.5 million was slightly better than the retailer’s own guidance in August.

Bed Bath & Beyond expects to “breakeven” on operating cash flow by the end of its current financial year. It continues to see a hit to same-store sales in the 20% range this year, as per the earnings press release.